Trucks, shovels and flats of flowers are Fred Anderson's
tools for designing and installing custom landscaping. But when it
comes to marketing, he has only one tool: the human mouth.

One hundred percent of Anderson Landscape Construction
Inc.'s clients come from referrals, either from professional
architects and builders or from former clients. That makes the
five-person Lancaster, Massachusetts, firm an extreme example of
what marketers have always known but are beginning to rediscover
and re-emphasize--that word-of-mouth is one of the best tools in
any marketer's arsenal.

"It's the most effective form of advertising any
business can have," says Murray Raphel, president of Raphel
Marketing in Atlantic City, New Jersey, and co-author of the
marketing guide, Up the Loyalty Ladder (HarperBusiness).
"You have unpaid salespeople selling to others, encouraging
them to use your goods and services because of their pleasure with
your service."

Word-of-mouth not only works, it's inexpensive. Walla Walla,
Washington, word-of-mouth marketing specialist Michael Cafferky
wrote a manual called Let Your Customers Do the Talking
(Upstart) because his small-business clients couldn't afford
anything else. "I was forced to find marketing tactics with
zero budget," says Cafferky. "Word-of-mouth is one of the
most natural."

For some entrepreneurs, word-of-mouth may not merely be the best
or most efficient marketing tool: It may be the only one. The
wealthy estate owners Anderson sells to, for instance, don't
base their buying decisions on TV commercials, billboards or phone
book ads, he explains. "They choose the people they want based
on other people's references. And they won't find those
people in the Yellow Pages."

Word Up

To a marketer, word-of-mouth is what people say about your
business as they go about their daily lives. It happens when one
friend tells another, "You should check out that new
restaurant downtown. The food's great!" It happens in a
negative way when another diner complains, "Stay away from
that new place on a Friday. You'll never get a seat!"

Though it may seem inconsequential, word-of-mouth can make or
break your business. "Word-of-mouth carries an implied
endorsement by the person who said it," says Art Davies,
president of Impact Solutions Inc., a two-person Cincinnati sales
agency that relies heavily on word-of-mouth. "When you have
other people talking about you, it carries weight."

Another name for word-of-mouth marketing is opinion leadership,
and today, everyone's a leader, according to Keith Tudor, chair
of the marketing department and an associate professor of marketing
at Kennesaw State University in Kennesaw, Georgia. "Everyone
is an expert in some area," explains Tudor. "And
that's one of the strongest influences on consumer
behavior."

As a marketing form, word-of-mouth is distinct from any other.
Unlike print advertising or direct mail, it primarily uses the
spoken word--although the Internet has made e-mail a potent
word-of-mouth medium. Unlike mass media, word-of-mouth is typically
dispersed one-on-one from person to person. And unlike discounts,
coupons or other cost-based appeals, its appeal is based on one
person's respect for another person's judgment.

Even testimonials, word-of-mouth's closest marketing
relation, are different in several ways. Testimonials are usually
used in paid advertising, says Raphel. Word-of-mouth is unpaid and
hence, more believable, he says.

It's also different from networking, where your primary goal
is to develop referrals from a group of people with a common
interest, such as chamber of commerce members or crafts hobbyists.
Networking, says Cafferky, is part of word-of-mouth marketing, but
word-of-mouth marketing is concerned with a broader market.

Perhaps the most distinctive trait of word-of-mouth marketing is
that, compared to other media, it is poorly understood. While a
great deal of research has been done on such arcane marketing
techniques as psychodemographics, word-of-mouth marketing has been
neglected, says Jerry Wilson, an Indianapolis speaker and marketing
consultant who wrote Word of Mouth Marketing (Wiley).

"Very few researchers have tried to do anything formally on
word-of-mouth," says Wilson. "As a result, people feel
like it's a giant, but it's nebulous and they don't
know how to conquer it."

Few things are known about word-of-mouth, besides the fact that
everybody can do it and it can be very powerful. With a little
thought and some patience, nearly any entrepreneur can put this
often-overlooked, one-of-a-kind marketing tool to work.

Mouth Manipulation

The first rule of word-of-mouth marketing is to do what you
would like people to say you do. In other words, good word-of-mouth
marketing starts with good products and good service.

Anderson makes sure people have good things to say about his
landscaping company by performing extraordinary follow-up service.
If a customer is unhappy with some aspect of a completed job, he
goes back and redoes it at his own expense.

"People are taken aback that I would come back to do that
at no cost," he says. "But I use a budget others would
use for advertising and spend it on making things right."

Next, generate positive word-of-mouth by finding out who is
already saying good things about you. "If you can identify a
person who has sent you business in the past, then most likely they
will send you business in the future," explains Cafferky, who
calls such opinion-leading customers "champions."

Champions are the low-hanging fruit of word-of-mouth marketing:
They produce the biggest results for the least effort. Locate
champions by asking new customers how they heard about you. When a
name crops up, roll out the red carpet for that customer with a
discount, freebie or special service to make sure this influential
individual remains positive about you and your business.

You can also go out looking for influential customers in hopes
of turning them into champions. Cafferky suggests trying to find
people who have recognized expertise in your area and aren't
shy about spreading their opinions. For example, the president of a
local wine-tasting club would be a strong champion for a wine
seller. Once found, these people become your targets for exemplary
treatment.

It's hard to employ word-of-mouth marketing when the whole
world is your intended target. Identifying champions or potential
champions narrows the playing field enough so you can get a handle
on it. To start, create a list of names and addresses of opinion
leaders you have or would like to have on your side, Cafferky
suggests. Then ply them with newsletters, special sale
announcements, coupons and other treatment to help build a positive
impression. "Companies that don't make a list of
names," says Cafferky, "can't get themselves
organized to do word-of-mouth marketing."

Another reason to identify influential word spreaders is, if
necessary, to control and reduce negative word-of-mouth. Raphel
says a talkative, dissatisfied customer is actually a great
opportunity for a savvy word-of-mouth marketer. That's because
a vocal complainer can quickly become a vocal champion if you
handle it right.

"Listen to what they have to say, then look them straight
in the eye and say 'Tell me what you want, and the answer is
yes,' " advises Raphel. "This is a great way to
generate positive word-of-mouth."

Special Words

Word-of-mouth marketing is most often relied on when budgets are
a marketer's chief constraint. It is, in fact, one of the few
forms of marketing you can employ without writing a check to
anyone.

Even when funds are plentiful, there are other situations that
call for word-of-mouth. "At the beginning of a business is one
situation because you have no reputation and there is no word
circulating, so you have to start from scratch," says Ilise
Benun, publisher of The Art of Self Promotion, a quarterly
newsletter for small-business marketing based in Hoboken, New
Jersey. "Word-of-mouth provides an opportunity to begin a
reputation, and you're in control."

For certain markets, word-of-mouth may always be the prime
marketing mechanism. Doctors and lawyers, of course, rely heavily
on word-of-mouth, partly because these professions have long
frowned on advertising but also because consumers tend to select
professionals based on personal references. The same is true of
hairstylists, housekeeping services and other personal-service
providers.

Other industries use word-of-mouth for different reasons. Movies
live or die by what people say about them, despite
multimillion-dollar advertising budgets; the same is true of other
entertainment-related products, such as nightclubs, restaurants and
catering companies. "There are certain things people tend to
talk about more," Wilson explains.

Word-of-mouth marketing expertise may be essential for
entrepreneurs who sell their goods and services in other countries.
Many of the most rapidly growing markets worldwide are in societies
where the mass media is not as well-developed as in industrialized
countries, says Cafferky.

For instance, Cafferky has had extensive experience marketing in
Romania, where broadcast television is not nearly the force it is
in the United States. An effective word-of-mouth campaign in that
country takes on extreme importance.

"Any person or organization involved with international
marketing had better understand word-of-mouth," Cafferky
warns, "because that may be all they have to use."

Language Limits

Word-of-mouth isn't the solution to every marketing problem,
however. Speed is perhaps its biggest limitation. Compared to other
marketing tools, word-of-mouth takes a long time to work. If you
want to reach the whole nation really fast, says Cafferky, this
isn't the answer.

Quite a while may go by before even a highly effective
word-of-mouth campaign begins to bear major fruit. Anderson says
entrepreneurs can generate half their new business from
word-of-mouth in three years, all of it within five years. "It
will help before five years," he says, "but it won't
provide a total source of new jobs."

Word-of-mouth also offers very limited control. "When you
buy an ad in the newspaper, you can control exactly what is said,
when it is said and, to some degree, to whom it is said," says
Cafferky. "But the fact is, you just cannot control what and
when a consumer says something about your product."

And if your marketing goal is to point out a competitor's
faults, word-of-mouth will be of little use. "You can't be
negative with it against a competitor," says Davies. "You
need to stay positive."

Finally, word-of-mouth is likely to be of limited value in some
industries and with some products simply because they're not
frequent topics of conversation. "When was the last time
somebody told you about some great shoestrings they bought?"
asks Wilson. "The mundane things people buy, we don't talk
about."

Mixed Message

Just as the right word in the right place can work wonders, the
wrong word in the wrong place can wreak havoc. For instance,
word-of-mouth marketing can be very risky if the message being
spread is inconsistent with your other marketing messages.

One example of this might be if the word-of-mouth message is
that your company is set up for professional or business clients
only, but your newspaper ads are aimed at the general public.
"Consumers can smell that stuff a mile away, and it makes your
paid advertising totally ineffective," warns Cafferky.
"And if it is effective, it brings in new customers only to
make them upset."

You can also make a mistake by relying too much on
word-of-mouth. As powerful as it is, it's not the only solution
to most businesses' marketing needs. Some products and services
need to be marketed through the standard advertising channels.
"Distributors won't touch some products unless you show
you have an advertising budget," says Cafferky.

Perhaps the biggest mistake may be to ignore word-of-mouth
marketing entirely. Even in a well-crafted traditional marketing
campaign, what people say about your product or service can have an
effect. Negative word-of-mouth can be devastating, says Raphel; the
best way to fight it is with positive word-of-mouth.

The mainstream marketing community may not have embraced
word-of-mouth marketing, but there are numerous marketing experts
who have recognized its value. Benun suggests the writings of Jay
Conrad Levinson, author of the Guerrilla Marketing series (Houghton
Mifflin) and a regular Entrepreneur columnist. Raphel also
recommends the books of master marketers such as Stanley Marcus and
David Ogilvy.

One thing all expert marketers realize is that although it may
be called word-of-mouth, this form of marketing gets its real
strength because that's not its real source. Word-of-mouth
carries a special freight of honesty and conviction because, unlike
any other marketing message, says Anderson, "word-of-mouth is
speaking from the heart."

Good Word

When bad word-of-mouth marketing about your business starts
spreading, it can be devastating. If your company is a target of
negative word-of-mouth, it's time for emergency measures. These
five steps will cork up bad-mouthers quickly:

1. Generate positive word-of-mouth. Good
comments are the best way to beat bad comments. Michael Cafferky,
author of Let Your Customers Do the Talking (Upstart), says
many customer complaints are related to employee behavior. Start
your counteractive measures by training or, if necessary,
retraining employees in good customer service skills, empowering
them to handle problems immediately and communicating customer
comments to everyone as quickly and completely as possible.

2. Gather complaints. Many businesspeople
dislike dealing with complaints. But complainers are likely to
spread negative word-of-mouth. Stop them by gathering and dealing
with complaints shortly after the upset occurs. Set up toll-free
complaint hotlines, suggestion boxes and customer survey cards;
train employees to solicit complaints.

3. Survey opinion leaders. Opinion leaders
can stop bad word-of-mouth as quickly as they can start it. Survey
them by telephone, mail and in-store interviews to find out what
they think of your business. Then, do something to make them like
you more: Offer a freebie, give them special service, make them
feel important.

4. Keep it simple. Complex explanations of
why your business was not at fault sound like rationalizations to
angry customers. Keep your fix basic: Admit your mistake,
apologize, flatter customers by asking their opinions, and offer a
solid fix like a refund or a gift certificate.

5. Plan for trouble. No business is immune to
negative word-of-mouth, and forewarned is forearmed. So have plans
for emergency public relations campaigns, customer service
training, survey efforts and guarantees in place before you need
them.